Deal Junkies Be Patient

The Real Estate Espresso Podcast

Deal Junkies Be Patient

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Welcome to The Real Estate Espresso Podcast, your morning shot of what’s new in the world of real estate investing. I’m your host, Victor Menasce. On today’s show, we’re looking at the anxiety of missing a deal. Real estate investors are deal junkies. Let’s call it like it is. Today we’re going to look at a real-life example. We’re going to talk about creating value in land.

There’s two main methods for creating land value. One is to start with raw land and carve it up, get it zoned and service for development. The other is to take land that’s already been carved up into tiny parcels and build it back together so you can do something more substantial with it.

Sellers often think they’re the ones holding the cards. Their property is worth a gazillion dollars, especially if it has development potential. Some rich developer will surely offer them so much more money than the property is currently worth. But in a dense urban environment, land is both scarce and abundant.

The proposed building that we’ve already designed is a 66-unit midrise building. Now 66-units is a tad small from a property management standpoint. Ideally, a building should have over 100 units to optimize the economics of managing the project.

The seller was asking $1 million a year ago for his property—which we considered unfit for development because of its limited area and utility issues—is now being offered at a 30% discount. Sellers often get confused because of the realtors who pitch the highest sale prices in an area, giving a false impression about potential land values.

Truth be told, a single-family home is not going to want to sit next to a six-story building. The seller will likely struggle to sell to a non-owner occupant. For now, we wait. Maybe we’ll get another of the neighboring properties under contract and negotiate a brand new land assembly for two more properties. Land assemblies are slow and time-consuming, and it pays off to be a patient buyer.

As you consider that, have an awesome rest of the day, and go make some great things happen. We’ll talk to you again tomorrow.

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